Maryland Judge Rejects Kalshi Injunction, Rules State Law Trumps Federal Oversight

A Legal Showdown Over Federal Preemption

The case, KalshiEX LLC v. John A. Martin, et al., centered on a critical legal question: Does the federal Commodity Exchange Act (CEA), which regulates Kalshi, preempt Maryland’s state laws on sports betting?

Kalshi argued that as a federally regulated entity, it should be exempt from state-level licensing requirements for its sports-related event contracts.

U.S. District Judge Paula Xinis soundly rejected this argument. In her decision, she found that Kalshi had failed to show a likelihood of success on its preemption claim.

The judge noted that gambling has traditionally been regulated by the states and that Congress showed no “clear and manifest purpose” to strip them of that power, even for platforms like Kalshi.

The Court’s Reasoning: “Strong Presumption Against Preemption”

The judge’s decision was based on a “strong presumption against preemption.” She pointed to several key factors that undercut Kalshi’s argument.

First, the CEA itself contains a “Special Rule” that explicitly allows the Commodity Futures Trading Commission (CFTC) to disallow contracts that involve “activity that is unlawful under… State law.” This, the judge wrote, “clearly reflects an affirmative intent to preserve state laws.”

Second, the judge highlighted that when the CEA was enacted and later amended, sports betting was largely illegal at the federal level. It is therefore “highly unlikely” that Congress intended to override state sports betting laws at that time.

Finally, the court found that Kalshi could simply get a Maryland sports betting license and still comply with all federal regulations, meaning there was no direct conflict between state and federal law.

Kalshi Vows to Appeal

The ruling opens the door for the Maryland Lottery and Gaming Control Commission to enforce the cease-and-desist letter it sent to Kalshi earlier this year. Kalshi has argued that blocking its services in a single state is technically impractical and would cost tens of millions of dollars to implement the necessary geolocation technology.

In response to the decision, Kalshi immediately announced it would appeal to the Fourth Circuit Court of Appeals. The company is now in a precarious legal position, as this ruling directly contradicts previous decisions in Nevada and New Jersey, where judges granted Kalshi preliminary injunctions in similar cases.